Are you among the 45% of Americans dissatisfied with their current bank and looking to switch? If so, you’ll be pleased to learn that there are thousands of banks to choose from. But how do you go about switching banks?
How to Switch Banks
The process doesn’t have to be complicated. Below we’ll walk through the 5 steps to take when you decide to make the switch. Following these steps can make the process as smooth as possible.
1. Pick Your New Bank
Once you’ve decided it’s time to switch banks, you’ll need to start looking for a new bank or credit union. But how do you start your search?
One good place to start is with the reason you want to change banks.
For instance, if your current bank charges high fees, you can look for low-fee or no-fee accounts. Or, maybe you’re tired of dealing with horrible customer service. In that case, looking through customer reviews might be a good move.
To help focus your search, try making a list of banking features most important to you. Here are just a few features you can consider.
- Minimum balance requirements
- Online banking
- Banking app
- FDIC/NCUA protection
- ATM network
- Customer support availability
- Bank reputation
- Branch locations
- Promotions and interest rates
- Additional banking services (i.e., credit cards, home loans, etc.)
With your criteria set, you can narrow your search to only a few possibilities and then take time to evaluate these options before making a final decision.
2. Look at Your Banking History
Before making a final decision and opening a new account, consider taking a look at your current banking history. There are two main reasons to do this.
The main reason is to understand what you’ll need to transfer over when opening your new account. If it helps, make a list of all ACH deposits as well as all payments drafted from your account.
The other reason to look at your current banking history is to help narrow down your search for a new account. If, for instance, your bank balance dips very low during the average month, then you might want to avoid banks that require a minimum balance.
Looking through your history can also give you an idea of how often you use the ATM, how high your balance gets, how often you write checks, and other patterns that could affect your decisions.
3. Open and Fund Your New Account
Depending on the type of bank or credit union you choose, you may have the option of initiating this process in person or online. Regardless of which method you choose, the process is nearly identical.
You’ll need to start by providing your personal details (name, address, etc.) and verifying your identity (i.e., uploading a copy of your driver’s license). If you are opening an account at a credit union, you’ll also need to go through the membership step.
At this point, the financial institution can choose to research you. While this can be done through a formal credit check, reviewing the ChexSystems database is more common. This company gathers data points like how often you’ve overdrawn your account.
The final step in opening a new account is to fund it. This can be done via cash, check, or electronic transfer. You can also order checks and open additional accounts (i.e., savings) as needed.
4. Transfer Deposits and Payment to the New Account
Once the new account is fully set up, you’ll need to begin transferring over all direct deposits and automatic payments.
If you haven’t already, go through your old account and make a list of all automatic transactions. And don’t forget to consider periodic payments like quarterly subscriptions or annually-billed services.
When updating your banking information with your employer(s), creditors, utilities, etc., just be aware that changes can take up to a month or more to go into effect. Because of this, you’ll want to keep enough money in both your old and new accounts to cover any automatic payments.
Once you’ve taken care of all automatic payments, you may also want to update billing information for all other merchants or creditors. For example, you may need to add your new account to your credit card account and set it as the default for payments.
5. Close Your Old Account
With your new account open and all transactions being transferred, it is time to close your old account. However, you should wait to do this until you are confident that no deposits or payments are being processed through the old account.
Depending on your old institution, you may be able to quickly transfer any remaining funds and close out the account online. However, some banks/credit unions may require a phone call, online chat session, certified letter, or in-person appointment to close your account.
Be sure to get confirmation (proof) from your bank that the account is closed.
With the account now closed, you’ll want to cut up and shred any remaining debit cards and checks. But, even with the old account closed, you’ll want to closely monitor things for the next few months.
Alternatively, you can keep your old account open if it offers desirable benefits or features (i.e., a great savings account APY). You don’t have to keep all your accounts at one financial institution.
For most individuals, switching banks is relatively easy. With the advent of online banking, setting up a new account, transferring funds, and closing your old account can be a breeze.
In certain situations, however, the process may be time-consuming. For instance, it may take your employer a while to update direct deposit info, or your old bank may make you jump through some hoops to close your account.
There is no need to physically go into a bank branch to close out an existing account or open a new one.
You can quickly open a new account online by filling out an application on the bank’s website. And provided your old bank offers online banking, you can immediately create a transfer of funds to the new account.
Depending on your old bank’s policies, you may be unable to close out an account online. However, you should be able complete the close-out either over the phone or through online chat.
Opening a new bank account can be accomplished within a few minutes. However, closing your old account may take longer, especially if you have pending transactions or a current overdraft.
After opening a new account, you’ll need to update account info with your employer(s), utilities, services, credit cards, etc. Once this is done, you can review both old and new accounts to verify everything has been transferred.
If you have minimal bills and deposits, switching might be completed in a few days. It may take three months or more if your banking is more complicated.
Once you complete the switch, all of your deposits and payments will begin processing through your new account.
Your old account will be closed, and your old debit card will no longer work.
If you have transactions that post to your old account after you close it out, the bank may contact you to collect payment on these transactions.
If your current bank or credit union is locally based, and you are moving out of their service area, switching banks might be a good choice. This especially applies if you are moving internationally.
If your current banking institution is a larger one that offers service nationwide, then there is no reason to switch if you are otherwise satisfied with their services. Just be sure to update your address info with them when you move.
Many banks are currently offering cash incentives to customers looking to switch. These promotions are commonly found at larger banks and credit unions and may be available only for specific customers or account types.
But, while these offers can be attractive, they are not a replacement for other features and services. To get an idea of what some of the top financial institutions offer, check out our list of the six best online banks or the six best credit unions.